Research Group Projects and Descriptions

In the eRationality group we study how people behave and make day-to-day decisions, particularly in electronic environments. We investigate rationality, semi rationality, bounded rationality, and just plain irrationality. We wish to build tools that reformulate the options available to people so that they can maximize their own happiness.

Economic theories of valuation generally assume that prices of commodities and assets are derived from underlying "fundamental" values. For example, consumer microeconomics assumes that demand curves for consumer products can ultimately be traced to the valuation of pleasures that consumers anticipate receiving from these products. Current work suggests that preferences are initially malleable, but become "imprinted" (precisely defined and largely invariant) after the individual makes an initial decision. Prior to imprinting, preferences are "arbitrary," (highly responsive both to normative and non-normative influences). Following imprinting, preferences are "coherent" (more precisely defined and largely fixed in subsequent decisions). The model predicts that consumers will respond to changes in conditions in a coherent fashion, as if supported by demand curves derived from fundamental preference, even when their initial valuations are arbitrary.

Americans have a negative personal savings rate; this indicates budgeting and saving can be very hard to do—money is abstract, fungible, and difficult to think about, and current software for planning budgeting and savings does not remove this difficulty. However, research from psychology and behavioral economics suggests ways to make personal budgeting easier, more natural, and more successful, by making trade-offs and the effect of risk more concrete. This project aims to use these principles to create a more effective tool for personal money management.

Alumni Contributor(s): Elan Pavlov

The placebo effect is not limited to sugar pills in clinical trials of medications. In fact, placebos are a specific example of the affect of meaning on health. All medicines work in two parallel ways, as a direct result of the active medication, and indirectly as a placebo response. Expectations and beliefs lead to measurable and real health outcomes, and one important way that expectations and beliefs are manipulated is by pricing, branding, and marketing. These are powerful factors that can affect how people respond to medicines. This project investigates how differences in pricing, branding, and other marketing factors affect people’s response to medication. By understanding this response, we can understand how people respond to drugs in the real world outside of the clinical trial.

The standard model of labor in economics assumes that work is aversive and that the employer, therefore, has to pay the employees money to compensate them for the disutility they incur when producing labor. While this basic model approximates the provision of some types of jobs (smelling shoes to diagnose odor problems, collecting garbage, lifting bricks), it seems to mischaracterize the motivations people have in taking jobs requiring more intellectual abilities, thinking, or creativity. Professors, physicians, teachers, and engineers are but a few examples of professions that fulfill aspects of one’s life that are not captured by the standard model. We aim to develop new frameworks, based on the psychology of labor, from which to understand the complex and important problem of compensation and its relationship to motivation, effort, and loyalty.

Because of rising energy costs, of considerable interest in many parts of the world is the smart energy meter: a tool to let consumers know how much electricity they are using in their homes or offices at any given time. Instead of guessing at how much energy they are using and waiting to see their bill at the end of the month, users can directly observe the costs of, for example, leaving a computer on overnight, or how much they save by lowering the heat by one degree. The current project studies how consumers react to energy meters in their homes: how much and in what way they save energy, if these changes are lasting, and how to encourage further energy savings.